Libra’s Long Week In Washington 


While we cannot accurately say that the two days Facebook’s David Marcus were the worst two days a Facebook executive has ever had in front of Congress, that statement is more a testament to how rough some of Facebook’s recent congressional hearing have been.  It can in no way be taken as a sign that senators on Banking Committee on Tuesday or their congressional counterparts in the House of Representatives on Wednesday went easy on Facebook’s David Marcus, head of  its crypto currency project, Calibra.

They didn’t.

Highlights from Tuesday’s hearing include Ohio Sen. Sherrod Brown calling Facebook “dangerous” and “delusional” if they thought they should be allowed to create their own form of currency based on their less than stellar record of preserving consumer privacy.

“It takes a breathtaking amount of arrogance to look at that track record and think, you know what we really ought to do next? Let’s run our own bank and our own for-profit version of the Federal Reserve for the world,” Brown noted.

And while Democrats were the most vocal critics on Facebook during Senate hearings — they were far from alone.  In fact, the Libra plan seemed to foster a rare moment of bipartisan cooperation, though Republicans were somewhat more likely to say something nice to Marcus, while firmly rebuffing the crypto concept.

“Facebook has chosen to advance a set of values in which truthful reporting has been displaced by flagrant displays of [expletive] ... I have great respect for Facebook, but Facebook now wants to control the money supply. What could possibly go wrong?” said Louisiana Sen.  John Neely Kennedy.

And when the Marcus appeared before the House — he heard more of the same.  And then some.

Another Day, A Lot More Doubts 

Representatives on the House Financial Services Committee had a few encouraging words for Marcus in terms of the wonder of innovation — and a lot of questions as to whether Facebook should really be going into the currency innovation business.

“Facebook has data on billions of people and has repeatedly shown a disregard for the protection and careful use of this data. With the announcement that it plans to create a cryptocurrency, Facebook is continuing its unchecked expansion and extending its reach into the lives of its users,” noted Financial Services Committee Chair Rep. Maxine Waters of California.

Waters, since the Libra project was first announced, has been a sharp critic of Facebook’s expansion into the world of financial services, and has repeatedly called for Facebook to cease and desist on the project until such time as it can be brought under regulatory control.  Waters re-iterated those calls during the House hearings Wednesday, and she was not alone.

“There are a lot of questions about this project. It’s big and very bold. Some would say it’s too bold,” New York Rep. Carolyn Maloney said.

Others, like New York Rep. Alexandria Ocasio-Cortez  noted that the plan’s expansive nature really brings up important questions about just how large Facebook should be allowed to become, and how much power it should be allowed to amass.

“Facebook, which is a publishing platform, an advertising network, a personal telecommunications network, a surveillance corporation, a content distributor, now also wants to establish a currency and act through its wallet as, at a minimum, a payment processor. Why should these activities be consolidated under one corporation?” Ocasio-Cortez asked.

Ocasio-Cortez's comments echo those put forth by Federal Reserve Chair Jerome H. Powell from his testimony on Libra.

“The size of Facebook’s network means it could be essentially, immediately and systemically important,” Powell said, further noting “Libra raises serious concerns regarding privacy, money laundering, consumer protection, financial stability. These are concerns that should be thoroughly and publicly addressed.”

As was the case during the Senate hearings, Facebook got some very conditional support from Republican House members during Wednesday’s hearings.

“Washington must go beyond the hype and ensure that it’s not the place where innovation goes to die. Just because we may not fully understand a new technology proposal does not mean we should immediately call for its prohibition, especially when that proposal is just that, a proposal,” North Carolina Rep. Patrick T. McHenry noted, in response to calls for Facebook to stop short right now.

But his follow-up indicated that he was more pro-innovation than specifically pro-Facebook

“I have no idea if Libra will lead to greater financial inclusion, lower remittance costs — which have the opportunity and would mean families could send money to each other more cheaply and easily than today — or if it’s just a ploy to shoot Facebook’s Twitter mentions through the roof. We’ll see.”

Wisconsin Rep. Sean Duffy offered Facebook “kudos on the innovation” before starting in on a line of questions about who is allowed to use the Libra network, what kinds of transactions can it support — and how secured against money laundering it actually is.

“Can Milo Yiannopoulos use Libra? Can Louis Farrakhan? Both of those people are banned from Facebook. “Can a gun dealer” Duffy asked,  noting that the sale of firearms is prohibited on Facebook.

Marcus said that at this point he is not sure about those specific use cases — but repeatedly affirmed that AML/KYC protections will be a central concern of the new network.

“As far as the Libra network is concerned, we'll have an anti-money-laundering program," Marcus said on Tuesday to the Senate.  In his continued testimony on Tuesday — he promised to ensure "the proper measures are taken to avoid this network to be used for other purposes than it was designed for” and that the Libra Association "will implement safeguards that require service providers in the Libra network to fight money laundering, terrorism financing, and other financial crimes."

That answer, however, left several lawmakers with concerns about Facebook’s proposed timeline for Libra, noting that it seemed that all the safeguards promised and oversight required internationally cannot possibly be achieved by the 2020 timetable.

“I’m concerned a 2020 launch date represents deep insensitivities about how Libra could impact U.S. financial security, the global financial system, the privacy of people across the globe, criminal activity and international human rights,” said Missouri Rep. Ann Wagner noted.

New York Rep. Nydia M. Velázquez made the same point — albeit somewhat more sharply when she noted:

“This is not Silicon Valley; you cannot work out problems as you go.”

And though Marcus reaffirmed repeatedly that Facebook would “take the time to do this right, and with properly regulatory oversight,” he did notably sidestep requests made by representatives for a small pilot program overseen by the Federal Reserve or to slow down the Libra time scale.

What’s Next 

Facebook, of course, wasn’t the only Big Tech firm that took a rough ride on Capitol Hill last week.

Google’s vice president for government affairs and public policy was told by Missouri Sen. Josh Hawley: “Clearly, our trust and patience in your company and your monopoly has run out.”

Rep. David Cicilline of Rhode Island got into a spirited debate with Amazon’s associate general counsel Nat Sutton at a hearing this week over whether or not Amazon’s access to third-party data through its marketplace in its creation and promotion of private label brands.  Cicilline asserted it must create a “conflict of interest.”

When Sutton replied that it did not, Cicilline offered the following pointed response: “I may remind you, sir. You are under oath.”

Facebook took the most, and perhaps the harshest criticism of the week, but they were far from the only big tech player in the crosshairs.

As for what is next on the Libra journey?  Given the level of skepticism expressed last week on Capitol Hill and beyond, it's safe to say a lot more hearings are will be in the Libra project’s future.

“We need Zuckerberg here,” California Rep. Brad Sherman demanded. "This is an attempt to transfer enormous power from America to Facebook.”

Facebook is working hard to assure legislators that no such power transfer is underway and Marcus was adamant during his two days in front of Congress that the project will not move forward without regulatory approvals in the U.S. and around the world.

But if the last seven days have demonstrated nothing else, Facebook and the Libra Association has a long, steep hill to climb getting there.



The September 2020 Leveraging The Digital Banking Shift Study, PYMNTS examines consumers’ growing use of online and mobile tools to open and manage accounts as well as the factors that are paramount in building and maintaining trust in the current economic environment. The report is based on a survey of nearly 2,200 account-holding U.S. consumers.